Price The Market Part 8
Glen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hi, my name is Glen Bradford and I've undertaken what a few people have already advised me in the past 48 hours to be an impossible task. I want to price the S&P500. Impossible you say? Challenge accepted.
39. Lennar Corp (NYSE: LEN) is overvalued from where I sit. When the ERCI is forecasting a recession and all my indicators point to the balance sheet recession in the US not letting up and baby boomers aging, I question where the demand even to fill the shadow banking inventory of homes is going to be coming from. Target: $15-$19.
40. Limited Brands Inc (NYSE: LTD) is worth somewhere between $35 and $45. That said, I see that their is a special dividend coming up on December 23, 2011 for $2. That's a 5% special dividend at these prices. That illustrates their committment to returning value to shareholders. I think that this is a terrific strategy, but I'd try to focus on share repurchases at lower prices and dividends at higher prices.
41. Lowe's (NYSE: LOW) is a play on the US economy. The unemployment numbers coming out recently look good but that's because people appear to be giving up when it comes to seeking employment as opposed to getting employed. I can't say that I'll be a fan of the US Housing market for at least another 12-24 months, but for the most part I don't believe that there is a ton of downside left because there are investors out there with a lot of cash that like to own tangible assets. Target: $20-$25.
42. Macy's (NYSE: M) has room to run. They are worth somewhere between $30 and $40 and are trading in the lower quartile of that range at present. As the rich continue to get richer and the poor continue to well, flounder, marketing is everything. Luxury retail like Macy's is positioned fairly well for this. This is me betting that the divide between those that have and those that do not will continue to grow.
43. Marriott Int'l (NYSE: MAR) is perhaps undervalued, mostly because they appear to be unloading their timeshare business. Let me tell you about timeshares. They are a ripoff. My grandma owns/owned three. She paid something like $15,000 for each of them individually and then paid increasing annual maintenance fees until it makes more sense to stay at hotels than at timeshares. Now, the 'investment' paradigm, where the timeshare salesagent advised timeshares would appreciate in value is completely backwards. My grandma actually had to PAY someone to TAKE them off her hands! They're a liability as far as I'm concerned. That said, Marriott is worth $30-$35.
44. Mattel Inc (NASDAQ: MAT) doesn't look half bad. Target: $27-$33. Their reasons for their latest acquisition of HIT seem reasonable and the price is reasonable as well. I wouldn't say that it's a steal but it's good to see when companies don't overpay for acquisitions. I can't even speak to the companies like Pfizer that have a terrible acquisition history. When it comes to an acquisition, the absolute most important thing is price. 9.5x EBITA is a good price for Mattel, but not a great price, which is good enough for me. Remember, I am simply looking for red flags.
Glen and his investors have no positions in any of the companies mentioned.